First Quarter Fiscal 2014 Results Are In for Qualcomm

Qualcomm Incorporated is an American global semiconductor company that designs, manufactures and markets digital wireless telecommunications products and services. You can find their chipsets in many devices.

Yesterday, Qualcomm announced its earnings results for the first quarter of the new fiscal year, which ended on Dec. 29, 2013. The numbers show a very positive first quarter. Chairman and CEO of Qualcomm, Dr. Paul E. Jacobs, had the following to say about it, "We are pleased with the start to our fiscal year, with record results in quarterly revenues, device sales reported by licensees and MSM chip shipments."

A breakdown of the first quarter results for Generally Accepted Accounting Principles (GAAP) is as follows:

• Revenues: $6.62 billion, up 10 percent year-over-year (y-o-y) and 2 percent sequentially.
• Operating income: $1.49 billion, down 28 percent y-o-y and 6 percent sequentially.
• Net income: $1.88 billion, down 2 percent y-o-y and up 25 percent sequentially.
• Diluted earnings per share: $1.09, even y-o-y and up 27 percent sequentially.
• Effective tax rate: 18 percent.
• Operating cash flow: $2.78 billion, up 41 percent y-o-y; 42 percent of revenues.
• Return of capital to stockholders: $1.59 billion, including $1.00 billion through repurchases of 14.2 million shares of common stock and $590 million, or $0.35 per share, of cash dividends paid.

It should be mentioned that at the end of November 2013, Qualcomm sold its Omitracs fleet tracking system. This was one of the company’s early success stories, but it had been struggling to grow lately. The gain on the sale of Omnitracs recorded in the first quarter of fiscal 2014 is presented as discontinued operations. 

Non-GAAP results exclude the Qualcomm Strategic Initiatives (QSI) segment, as well as certain share-based compensation, acquisition-related items and tax items. The non-GAAP breakdown is as follows:

• Revenues: $6.62 billion, up 10 percent y-o-y and 2 percent sequentially.
• Operating income: $1.85 billion, down 24 percent y-o-y and 5 percent sequentially.
• Net income: $2.16 billion, down 2 percent y-o-y and up 19 percent sequentially.
• Diluted earnings per share: $1.26, even y-o-y and up 20 percent sequentially.
• Effective tax rate: 18 percent.

Dr. Jacobs also added, “Looking forward, we expect our performance to reflect the continued strong global growth of smartphones, our chipset leadership position and our competitive strengths in 3G/4G technologies and products.”

Fiscal 2014’s first quarter showed a $665 million gain. After taxes, this figure comes down to $430 million, which relates to $0.25 per share. This was seen from its discontinued operations that were associated with the sale of its Omnitracs division.

There was also a $444 million charge or $346 million after taxes that are a result from an impairment charge. This came from certain property, plant and equipment that is related to its Qualcomm Mirasol Display Technology (QMT).

According to Qualcomm, its cash, cash equivalents and marketable securities totaled $31.6 billion at the end of the first quarter of fiscal 2014. This is compared to $28.4 billion from a year ago and $29.4 billion realized at the end of the fourth quarter of fiscal 2013.

Taking a look at the unit side, we see the following results for the first quarter:

• MSM chip shipments: 213 million units, up 17 percent y-o-y and 12 percent sequentially.
• September quarter total reported device sales: approximately $61.6 billion, up 16 percent y-o-y and 2 percent sequentially.
• September quarter estimated 3G/4G device shipments: approximately 276 to 280 million units, at an estimated average selling price of approximately $219 to $225 per unit.

As you can see from this, the numbers do reflect Dr. Jacobs’ positive outlook for Qualcomm.